IRS Audits: When the IRS Comes Knocking

I received an IRS audit notice. What should I do first?

First, don’t panic. I know that’s easier said than done—an IRS audit letter is terrifying. But an audit doesn’t mean you’ve done anything wrong, and it doesn’t automatically mean you’ll owe more money.

Here’s what you should do immediately:

Don’t ignore it: This should be obvious, but you’d be surprised how many people just freeze and do nothing. Ignoring an audit notice makes everything exponentially worse.

Don’t contact the IRS yourself: Before you call the number on the notice or respond, talk to a tax professional. What you say to the IRS can be used against you, and most taxpayers accidentally say things that hurt their case.

Call an Enrolled Agent: Contact me or another qualified tax professional immediately. We can review the notice, determine what the IRS is examining, and develop a strategy. As your representative, I’ll handle all communication with the IRS—you won’t have to talk to them at all.

Gather documentation: Start collecting all documents related to the items being audited. Receipts, bank statements, mileage logs, business records—whatever supports the entries on your tax return.

Don’t volunteer information: Only provide exactly what the IRS requests. Don’t offer additional information or documentation beyond what they’ve asked for.

I’ve represented hundreds of clients in audits throughout Detroit, Chicago, Cleveland, and surrounding areas. Recently, I handled an audit for a Chicago consultant who’d claimed significant home office and travel deductions. The IRS questioned everything. We organized his documentation meticulously, provided contemporaneous records, and demonstrated everything was legitimate. The audit concluded with no changes to his return.

What’s the difference between an office audit, a field audit, and a correspondence audit?

The type of audit matters significantly in terms of both complexity and stress level.

Correspondence Audit: This is the simplest type. The IRS sends you a letter asking for documentation to support specific items on your return. You respond by mail. These are usually limited in scope—maybe they want receipts for charitable donations or documentation for a business expense. About 75% of IRS audits are correspondence audits.

I help clients with these regularly. A Detroit homeowner received a correspondence audit asking for documentation of $12,000 in casualty loss deductions from storm damage. We gathered the insurance claims, contractor invoices, and photos of the damage, sent everything to the IRS with a detailed explanation, applicable tax code, and the deduction was fully allowed.

Office Audit: For these, you (or your representative) meet with an IRS auditor at a local IRS office. They’re more thorough than correspondence audits and usually involve business returns or returns with multiple questionable items.

I represented a Cleveland landscaping company in an office audit. The IRS questioned business vehicle expenses, equipment depreciation, and subcontractor payments. We met with the auditor, presented organized documentation, explained the business operations, and resolved all issues with only minor adjustments.

Field Audit: This is the most comprehensive and serious type. An IRS Revenue Agent comes to your business or home to examine your books and records. Field audits typically involve businesses, high-income individuals, or cases where the IRS suspects significant unreported income or fraud.

I handled a field audit for a Chicago restaurant owner. The Revenue Agent spent three days at the business, reviewing point-of-sale systems, comparing reported income to industry averages, examining supplier invoices, and checking employee records. Having representation for field audits is absolutely critical—these agents are highly trained and are looking for problems.

Can the IRS audit me if I had a professional prepare my return?

Absolutely, yes. Having a professional prepare your return doesn’t prevent an audit. In fact, sometimes professionally prepared returns get audited specifically because they claim aggressive deductions.

However, having professional representation makes a massive difference when you’re audited. When I prepare a return, I’m thinking ahead to potential audit issues. I’m ensuring proper documentation exists. I’m making sure deductions are legitimate and properly substantiated.

More importantly, if a return I prepared gets audited, I represent my client through the entire process. They don’t have to stress about it—I handle everything.

One thing to watch out for: some tax preparers disappear when audit season comes. I’ve had multiple clients come to me because their original preparer wouldn’t return their calls once an audit notice arrived. When choosing a tax professional, make sure they’ll stand behind their work.